The OECD is not feeling good about the state of the developed world this morning:
“The world economy is far from being out of the woods,” said the OECD’s secretary general Angel Gurria.
“The US fiscal cliff, if it materialises, could tip an already weak economy into recession, while failure to solve the euro area debt crisis could lead to a major financial shock and global downturn.”
The OECD cut its growth forecast across its 34 members for this year and next. It also revised down sharply its estimate for the eurozone economy, which it now believes will contract by 0.1% in 2013, rather than grow by 0.9% as forecast in May.
The U.S. fiscal cliff is an avoidable catastrophe. Via Meadia hopes that cooler heads will ultimately prevail in Washington, perhaps in part spurred on by the growing chorus of business leaders, media, and international organizations like the OECD.
Europe, however, is another matter completely. The eurozone’s overall economic contraction will be due primarily to Greece, Slovenia, Italy, Portugal, and Spain’s dismal outlooks, but predicted anemic growth in the UK and Germany certainly isn’t helping. Can Angela Merkel’s supposed plan for Europe to muddle through for the next five years on a mix of half-measures and overall austerity work in the face of such weak numbers? It’s seeming less and less likely — and the costs to the rest of the world look startlingly high.